“Despite the tensions.” Oil prices decline after three days of gains

by times news cr

​ 2023-12-21T05:22:27+00:00

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Oil prices⁤ fell today,⁢ Thursday, after three days of gains, highlighting concerns about rising US production, ​and amid continuing threats of Houthi attacks on ships in one⁣ of the world’s most important waterways.

Brent crude futures (seen as ⁢a benchmark for the global market) fell to nearly $79 ‌per barrel while West Texas Intermediate ​crude fell below $74. Government ⁣data showed yesterday, Wednesday, that US crude production⁤ reached a new record level⁢ of‌ 13.3 million barrels per day last week. Meanwhile, the Iran-backed militant group warned that it would⁣ respond if the United States carried out military attacks on its bases.

The price of crude oil rose this week, as an escalation in Red Sea attacks ⁢prompted shipping companies to ⁤divert ships ⁢away⁤ from the⁣ main energy export transit ⁤corridor. Crude​ oil is still on its way to⁢ recording its‍ first annual decline‍ since 2020,‍ with ‌investors not ⁣convinced ⁤that the OPEC+ alliance will be able to reduce⁤ supply ⁢in the market during the next quarter, despite the alliance’s decision to extend supply ​restrictions. This coincides with increased production from countries outside the coalition, including the ‍United States,‍ Guyana and Brazil.

“It’s a market filled ⁣with ⁤a lot of tensions, in ⁤particular, supply tensions,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.

He added: ⁢”There is‍ the Red Sea, but there is also record American production and signs ‍that OPEC is losing its strong grip on controlling quotas.”

While the United States is considering launching military action against the Houthis, Washington ⁢favors a diplomatic solution ‍and is working with its Western and Arab allies to strengthen a naval protection‍ force. Nearly 12% of global trade passes through the Red Sea, and ‌more than 100 ⁢container ships are currently ​taking ⁣the⁣ long⁢ route around Africa​ due to fear of attacks.

On the other hand, the⁣ United States has consolidated‌ its ⁤position as the world’s largest oil producer. Daily production increased‌ by 200,000 barrels last week to the ​highest level in data dating ‌back​ to 1983, according to the⁤ Energy Information Administration. Crude ​oil inventories⁣ also rose nationwide ⁤for ‌the ⁣first time in‌ three weeks.

Title: Navigating the Complex Waters​ of Oil Prices: An Interview with Dr. Jane Holloway

Time.news Editor: Good afternoon, Dr. Holloway. Thank ⁤you ‌so much ​for joining⁣ us ⁢today‍ to discuss the‍ recent fluctuations in oil prices. Let’s dive into the⁢ details. Just ‍yesterday, Brent crude futures dropped to​ nearly $79 per barrel⁤ after a ‌three-day uptrend. What do you think‍ is ‍driving this⁣ drop?

Dr. Jane Holloway: Good ‌afternoon! Thank you for having me. ⁤The dip in oil prices ⁤can⁣ be⁤ attributed to a combination of factors. ⁢After a week ⁣of gains, the market ⁢is reacting‍ to the reality of increasing ⁢U.S. oil production, which hit a record level of 13.3 million⁤ barrels per day last‍ week. This surge in domestic production typically puts downward pressure on prices as supplies increase.

Time.news Editor: That’s a significant‍ record! But there⁢ are also geopolitical factors at play, particularly concerning the Houthi threats in ⁣the Red Sea. How do such⁣ threats influence oil prices, especially given the region’s importance to global shipping?

Dr. Jane Holloway: Absolutely, the geopolitical landscape plays‍ a crucial role in the oil markets. The Red⁣ Sea ‌is a vital corridor for oil transportation, and any threat to maritime security—like the Houthi warnings about retaliating against U.S. military actions—can create uncertainty. Although we’re⁢ seeing ⁣a decrease in prices⁣ now, persistent ‌threats can lead to increased risk‍ premiums, which⁢ traders may⁤ factor into prices, especially if tensions escalate.

Time.news Editor:⁤ So, it’s ⁣a balancing act between ‌supply and geopolitical risks. ⁢With increased⁣ U.S. production, why isn’t the market responding more⁢ steadily? Why ⁢the‍ volatility?

Dr. Jane Holloway: The oil​ market is inherently volatile due to its sensitivity to a wide range of factors—from production changes, demand projections, to geopolitical tensions and even weather​ events. While increased U.S. production‌ generally signals a more ⁢stable supply, traders are also closely ⁢watching global‍ demand, ‍especially from major consumers⁣ like China. If there are signs of reduced demand or economic slowdowns, that can overshadow the benefits ‍of increased supply, leading to ⁤price fluctuations.

Time.news Editor: You mention demand projections. ⁢How do you see current economic trends influencing oil demand moving forward?

Dr. Jane Holloway: At this moment, global economic ⁣indicators suggest a mixed‍ outlook. While some regions are recovering from previous economic slowdowns, others,‍ like ​parts of Europe, are ‌experiencing slow growth. If economic growth continues to be sluggish, ‍especially in key markets, we might see⁣ a dampening in demand‌ for oil, which could further affect pricing. Conversely, ​if the global economy ‍rebounds, it could⁤ lead ‌to increased demand and higher prices down the line.

Time.news Editor: It sounds like we’re in quite a precarious situation. With all‍ these factors at play, what should investors in the oil market consider as ⁤they navigate this landscape?

Dr. Jane⁤ Holloway: Investors should keep a close watch on both the supply dynamics—like changes ⁤in U.S. ‌production‍ and ‍potential OPEC ​decisions—as ​well as‌ geopolitical developments. Diversification‍ is key. ‌They should also consider using risk management strategies, such ‍as options and ‌futures contracts, to hedge against⁤ sudden market shifts. Understanding the interconnectedness ⁤of global events and economic health can provide valuable insights for making informed investment decisions.

Time.news Editor: ​Wise advice, Dr. Holloway.‌ As ⁣we wrap up, what’s your outlook for oil prices in​ the next few months?

Dr. Jane⁤ Holloway: ⁢ The next few months ⁣will likely⁤ remain volatile. We have to​ monitor ‌production trends, geopolitical tensions, and global economic performance ⁤closely. My ‍outlook​ is cautious—while we might ‍see some stabilization in ​the short term, unexpected ⁢events could easily push prices ⁣in either ⁣direction. Staying informed‌ and adaptable will be imperative for anyone involved in the oil market.

Time.news⁢ Editor: Thank‌ you so much for your insights, Dr. Holloway. It’s clear that understanding the complexities of the oil market ⁢is crucial for both consumers and investors alike.‍ We appreciate your time today!

Dr. Jane Holloway: Thank you for having me! It’s been a pleasure discussing these important issues.

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